Canadian COMPETITION LAW

We are pleased to provide this global competition law update (India) from our friends at the leading Indian firm Luthra & Luthra.

Global Competition Law Update – India – April 2010 to June 2010

Fast/tampered electricity meters of NDPL and BSES- exploitative conduct-Enquiry by the CCI

Pursuant to findings in an Investigation Report by the Director General, the CCI has reportedly instituted an enquiry against Delhi’s electricity distributors, namely the BSES and NDPL for (i) not permitting consumers to install electricity meter of their choice and (ii) installation of meters that have been tampered with to work fast.  As on date, a consumer in Delhi does not have any option to select an electricity distributor.  Restraint on choice of consumers to install meters conforming to BIS standards and CERC guidelines and the information with the CCI that most of the meters installed at consumer’s premises run fast,  have been prima facie construed to be exploitative business practices and thereby a case of abuse of dominant position by a distributor under the Competition Act, 2002. As per media reports, the distributors have denied these allegations.  The further developments of the matter are awaited.

CCI probes alleged exclusionary practice of National Stock Exchange (NSE)

MCX Stock Exchange filed an information/complaint with the CCI against NSE (a leader in stock and derivatives trading) alleging that NSE is abusing its dominant position by indulging in unfair practice of predatory pricing. The CCI, after examining the information and hearing the parties, has found a prima facie case and has ordered its Director General to carryout detailed investigation and submit an investigation report for its consideration. The main allegation against NSE is that it has waived its transaction fee on currency derivatives and instead, charges a fee of Rs. 2 per lakh on the turnover in its derivatives segment. The informant contends that this is carried on with the intention of eliminating MCX from the market as it is not able to charge such fee which, in turn lead to huge losses. In terms of the Act,  the  predatory price means the sale of goods or provisions of service, at a price  by a dominant player which is below its cost of production and is a with a view to reduce competition or eliminate the competitors. The CCI has since put in public domain the regulations which will inter-alia govern the determination of cost while inquiring into cases of predatory pricing.

Inquiry into exclusive supply agreement between SAIL and Indian Railways

Jindal Steel & Power Limited (JSPL) had filed information with the CCI alleging that the Steel Authority of India (SAIL) has entered into a Memorandum of Understanding whereby, there is an obligation on Indian Railways to purchase all its requirements of ‘rails’ from the SAIL and that the exclusivity in the supply is an anti competitive agreement and a case of denial of market access to JSPL. The CCI sought comments of SAIL and the latter sought additional time to file reply inter-alia on the ground that the information needs to be collected from its plants/units.  The CCI refused the plea of extension of time and by its order of 8.12.2009, it held that there is a prima facie case against SAIL under the Act and referred the matter for investigation to the Director General.

SAIL filed an appeal against CCI’s prima facie decision including the manner of its such decision.  The CAT, however, in its order of 15^th Feb, 2010 upturned the prima facie and directed SAIL to furnish its comments/information and the CCI to take a decision thereon.

SAIL furnished its comments and the CCI has again held that there is a prima facie case under the Act and has referred the matter to DG to investigate and furnish report thereon.

The CCI has reportedly filed an appeal in Supreme Court  praying to hold that appeal against prima facie view that there exists a case by a party against which enquiry has been instituted by the CCI, is not maintainable in the Appellate Tribunal and the Supreme Court is now seized of the matter.

Kingfisher Airlines vs. Competition Commission of India

In October 2008, an alliance was announced between Jet Airways and Kingfisher (KF) which includes a code-sharing on domestic and international flights and cost-cutting measures including joint fuel management and cross-utilisation of crew. An information had been filed before the CCI by a frequent flier alleging that the alliance leads to the formation of a cartel and that it reduces competition amongst competitors. The CCI ‘on examination of information’ found a prima facie case and instituted an Inquiry against an alliance between Kingfisher Airlines Limited (KF) and Jet Airways (India) Ltd.

KF moved to the Bombay High Court questioning the jurisdiction of the Commission inter alia contending that the alliance was entered into before the day the relevant provisions of the Act came into force and that no study was undertaken before institution of enquiry.  The High Court dismissed the writ and held that the law is well settled that the Court should not stifle investigation at all, except for compelling reasons and that the CCI has a power to enquire and investigate into every complaint received under the Act.

The Order is significant as it makes clear that trade agreements entered prior to the date the law came into force, are subject to the scrutiny of CCI. An appeal, however, has been filed before the Supreme Court against the High Court order.

CIL under scrutiny by CCI

The Explosives Manufacturers Association of India (EMAI) has reportedly complained to the CCI that Coal India Limited (CIL) is procuring ‘mining explosives’ from a particular supplier without inviting bids from other suppliers. CIL is believed to have market share of 85% of the coal produced in the country and needs ‘explosives’ to remove the soil layer covering coal deposits in mines.  The Association contends that CIL has not given other suppliers a fair chance to compete through bids. The CCI after examining the information found a prima facie case of anti-competitive agreement and has referred the matter for investigation to its Director General. Section 3 of the Act empowers the CCI to prohibit agreement which has or is likely to cause appreciable adverse effect on competition within India, as anti-competitive and ‘void’. The further development in the matter are awaited.

SEBI appeals against SAT’s judgment on the concept of ‘control’

Securities Exchange Board of India (SEBI) has filed an appeal in the Supreme Court against the decision of Securities Appellate Tribunal in M/s Subhkam Ventures India Private Limited v SEBI. Discussing the role of investment companies, SAT had ruled that an acquirer does not acquire ‘control’ over the target company merely because the acquirer has (a) the right to appoint a nominee director on the board of a target company and require the nominee director’s presence for purposes of constituting a valid quorum and; (b) certain affirmative voting rights, that are typically conferred on an acquirer, pursuant to a SHA between the acquirer, the target company and its promoters. Consequently, SAT ruled that in such cases, an open offer would not need to be made by the acquirer pursuant to Regulation 12 of the Takeover Code. It was observed by SAT that control is a proactive and not a reactive power, in other words, it is appositive power and not a negative or preventive power.

The concept of control is extremely significant from a competition law perspective as the definition of ‘control’ is open ended under the Competition Act, 2002.

Competition Commission of India stays ban on ‘Ravana’ screening

On an application/information of Reliance Big Entertainment (RBEL), the CCI, instituted an Inquiry and by an interim order of June 18^th 2010, stayed a ban imposed by the Karnataka Film Chamber of Commerce (KFCC) on the screening of the movie Ravana. KFCC, a lobby comprising of local film makers,  had initially allowed the movie to be screened in 21 theatres in Bangalore and 4 theatres outside the capital and subsequently reduced it to be screened only in four multiplexes. It was also alleged that KFCC had sought an undertaking from RBEL that the restricted release was being done voluntarily. On June 24^th, the Commission upheld its interim order. The KFCC later filed a petition before the Karnataka High Court challenging the CCI order  but the petition was subsequently withdrawn.

Presently, the DG is seized of carrying out investigation into the matter alleged to find out details of alleged infringement of the Competition Act, 2002 and in the event of its findings being in the affirmative, the material/evidence in support thereof. The further developments are awaited.

Non payment of commission to travel agents by foreign airlines-enquiry against 9 airlines

The Travel Agents Association of India (TAAI) reportedly filed a petition with the CCI alleging that large number of foreign airlines including Lufthansa, British Airways, Singapore Airlines etc. have stopped paying commission to travel agents for booking air tickets. The CCI before forming its prima facie view that there exists a case under the Act, sought views of Directorate General of Civil Aviation (DGCA ) and the latter reportedly informed that transaction fee mechanism in lieu of commission,  is not in consonance with the law.

The CCI has instituted an Inquiry and directed its Director General to carry out investigation against all the 9 airlines and submit its report within 60 days for further consideration.  The further developments are awaited.

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